The House of Commons will hold the third reading of the Water (Special Measures) Bill today, which has already undergone multiple amendments. The Liberal Democrats have tabled an amendment to the bill which would prevent bankrupt water companies from being bailed out by their customers. Instead, it will be the creditors who make up the shortfall were any water company to enter special administration.
Water companies such as Thames Water have warned the government that they are facing potential bankruptcy. Thames Water has been asking the government to allow them to raise water bills to help them make payments on the company’s debt of £60.6bn. The BBC reported last August that analysts estimate Thames Water’s current debt is 80% its own value.
Many of the eleven water companies around England and Wales are also struggling financially. In light of this, last month the water services regulator, Ofwat, announced a £31 increase in the average water bills over the next five years.
The Water Bill stipulates that if the companies declare bankruptcy, then they will be nationalised. The government will take up temporary ownership of the water services, using state funding to ensure that water services continue.
What is the Water (Special Measures) Bill?
The House of Lords first heard this bill on 4 September 2024. It intends to address the recent performance of the water companies and plan a response to any bankruptcies. It also deals with the pollution of rivers by sewage dumping and the poor service received by many customers. It is presented as a way for the government to rapidly resolve the water crisis, while making improvements to the water industry.
The bill’s stated aim is to “make provision about the regulation, governance, and special administration of water companies.” The bill intends to bring the water companies to account. The four key points are to block bonuses for water companies’ executives, to bring criminal charges against lawbreakers, to impose automatic and severe fines for wrongdoing, and to enable independent monitoring of every sewer. Additionally, this bill proposes that water companies publish annual pollution incident reduction plans.
For the third and final reading of the Water Bill, Liberal Democrats MPs have decided to push another vote to include the protection of water companies’ customers. Previously, both Labour and Conservative MPs had abstained or voted against.
Liberal Democrat Environment Spokesperson Tim Farron commented that it would be a scandal if customers were forced to pay the water companies while executives continue to pay themselves large bonuses.
“That is why the Liberal Democrats have put forward an amendment to protect customers from water companies’ incompetence,” Farron continued.
This amendment would “require creditors—largely hedge funds and other big financial companies—who have loaded debt onto water companies and then profited from the interest, to cover those costs instead.”
As the bill is currently worded, if there are any shortfalls from any financial requirements, then the Secretary of State would be able to “require a water company to raise amounts of money determined by the Secretary of State from its consumers and to pay those amounts to the Secretary of State to make good any shortfall.”.
“Under the former Conservative government’s watch, disgusting sewage was pumped into British waters, and vital infrastructure was neglected. And the current government seems content to continue the Conservatives’ appalling track record,” Farron stated.
Additionally, the Liberal Democrats included clear pollution reduction targets, stopping water companies from using offshore holding companies, ensuring there was a timeline for when the ban on bosses bonuses would come in, and requiring water companies to install volume flow meters so they could properly monitor sewage spills. Labour and Conservative MPs also rejected these measures.
